Correlation Between MegaStudy and Eugene Investment

Can any of the company-specific risk be diversified away by investing in both MegaStudy and Eugene Investment at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining MegaStudy and Eugene Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MegaStudy Co and Eugene Investment Securities, you can compare the effects of market volatilities on MegaStudy and Eugene Investment and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in MegaStudy with a short position of Eugene Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of MegaStudy and Eugene Investment.

Diversification Opportunities for MegaStudy and Eugene Investment

-0.11

Correlation Coefficient

MegaStudy  Eugene Investment

Good diversification

The 3 months correlation between MegaStudy and Eugene is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding MegaStudy Co and Eugene Investment Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eugene Investment and MegaStudy is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on MegaStudy Co are associated (or correlated) with Eugene Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eugene Investment has no effect on the direction of MegaStudy i.e., MegaStudy and Eugene Investment go up and down completely randomly.

Pair Corralation between MegaStudy and Eugene Investment

Assuming the 90 days trading horizon MegaStudy Co is expected to under-perform the Eugene Investment. But the stock apears to be less risky and, when comparing its historical volatility, MegaStudy Co is 2.84 times less risky than Eugene Investment. The stock trades about -0.04 of its potential returns per unit of risk. The Eugene Investment Securities is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  252,500  in Eugene Investment Securities on December 25, 2024 and sell it today you would earn a total of  10,500  from holding Eugene Investment Securities or generate 4.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

MegaStudy Co  vs.  Eugene Investment Securities

MegaStudy

Risk-Adjusted Performance

Very Weak

Over the last 90 days MegaStudy Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MegaStudy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Eugene Investment

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eugene Investment Securities are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Eugene Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MegaStudy and Eugene Investment

The main advantage of trading using opposite MegaStudy and Eugene Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MegaStudy position performs unexpectedly, Eugene Investment can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Eugene Investment will offset losses from the drop in Eugene Investment's long position.

The idea behind MegaStudy Co and Eugene Investment Securities pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Commodity Directory module to find actively traded commodities issued by global exchanges.